2023 (1) TMI 256 - SC - Service Tax

CIRP - Successful resolution applicant - Demand of service tax - SVLDRS - Seeking direction to the respondents for consideration of the case of the petitioner under the scheme Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - seeking direction to respondents to appropriate the payment of Rs.1, 24, 28, 500/- towards settlement dues under the Scheme 2019 and that discharge certificate be issued to the appellant accordingly - moratorium is under force. HELD THAT - It is required to be noted and it is not in dispute that the appellant is entitled to the benefit of the settlement under the Scheme 2019. The Scheme 2019 came to be introduced on 01.09.2019 and the last date for making the application under the Scheme was 30.12.2019 and in fact the appellant submitted the application in Form No.1 on 27.12.2019 i.e. before the last date specified for making an application. Under the Scheme after the Form No.1 is processed the Designated Committee was to scrutinize the same and issue the Final Form No.3 determining the settlement amount which the applicant was required to deposit within a period of one month from the date of receipt of the final determination Form No.3. That the appellant was issued the Form No.3 on 25.02.2020 and was required to pay the settlement dues on or before 25.03.2020. However in view of the COVID-19 Pandemic the Government extended the time upto 30.06.2020. Therefore the appellant was required to deposit the settlement dues on or before 30.06.2020. However even before the Scheme 2019 came to be introduced the appellant was subjected to proceedings under the IBC which commenced on 11.09.2018 when the NCLT admitted the application under Section 7 of the IBC. Thus the moratorium under the IBC commenced on 11.09.2018. The CoC approved the Resolution Plan on 04.06.2019 and the same came to be approved by the NCLT by Order dated 24.07.2020. Therefore the moratorium under the IBC continued upto 24.07.2020. Under the provisions of the IBC no payment could have been made during the period of moratorium. Therefore the appellant was statutorily restrained/debarred from making any payment. Whether when it was impossible for the appellant to deposit the settlement amount in view of the bar and/or the restrictions under the IBC the appellant can be punished for no fault of the appellant? - HELD THAT - In the case of GYANI CHAND VERSUS STATE OF A.P. 2016 (9) TMI 1491 - SUPREME COURT it was observed by this Court that it would not be fair on the part of the Court to give a direction to do something which is impossible and if a person has been directed to do something which is impossible and if he fails to do so he cannot be held guilty - Applying the law laid down by this Court in the aforesaid decision to the facts of the case on hand the appellant cannot be punished for not doing something which was impossible for it to do. There was a legal impediment in the way of the appellant to make any payment during the moratorium. Even if the appellant wanted to deposit settlement amount within the stipulated period it could not do so in view of the bar under the IBC as during the moratorium no payment could have been made. In that view of the matter the appellant cannot be rendered remediless and should not be made to suffer due to a legal impediment which was the reason for it and/or not doing the act within the prescribed time. As the appellant was not in a position to deposit the settlement amount at the relevant time more particularly on or before 30.06.2020 due to legal impediment and the bar to make the payment of settlement amount in view of the mortarium under the IBC and as it is found that the appellant was otherwise entitled to the benefit under the Scheme as the Form No.1 submitted by the appellant has been accepted the Form No.3 determining the settlement amount has been issued the High Court has erred in refusing to grant any relief to the appellant as prayed. The impugned judgment and order passed by the High Court is hereby quashed and set aside. It is directed that the payment of Rs.1, 24, 28, 500/- already deposited by the appellant be appropriated towards settlement dues under Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 and the appellant be issued discharge certificate - Appeal allowed.

Summary

Issues Involved:
1. Validity of High Court's dismissal of the writ petition.
2. Existence and functionality of the Designated Committee under the Scheme.
3. Impact of the moratorium under the Insolvency and Bankruptcy Code (IBC) on the appellant's ability to make payment under the Scheme.
4. Legal remedies available to the appellant due to the inability to make payment during the moratorium.

Detailed Analysis:

1. Validity of High Court's Dismissal of the Writ Petition:
The High Court dismissed the writ petition on the grounds that it could not issue a direction contrary to the Scheme and that the Designated Committee under the Scheme was not existing. The Supreme Court found that the High Court erred in dismissing the writ petition without considering the statutory disability imposed by the moratorium under the IBC, which prevented the appellant from making the payment within the stipulated time.

2. Existence and Functionality of the Designated Committee under the Scheme:
The appellant argued that the Designated Committee under the Scheme, constituted as per Rule 5, continued to function manually even after 30.06.2020, pursuant to instructions issued by the CBEC. The Supreme Court noted that the Designated Committees were indeed functioning manually post-30.06.2020, as per CBEC instructions, to comply with court orders. Therefore, the High Court's observation that the Designated Committees were not in existence was incorrect.

3. Impact of the Moratorium under the IBC on the Appellant's Ability to Make Payment under the Scheme:
The appellant was subjected to a moratorium under the IBC from 11.09.2018 to 24.07.2020, during which no payments could be made. The Supreme Court acknowledged that the appellant was legally barred from making any payment during the moratorium period. The Court emphasized that it would be unfair to penalize the appellant for not making the payment when it was legally impossible to do so.

4. Legal Remedies Available to the Appellant Due to the Inability to Make Payment During the Moratorium:
The Supreme Court highlighted that no party should be left remediless due to the operation of law. The Court cited precedents stating that no law would compel a person to do the impossible and that the courts are meant to do justice. The Court concluded that the appellant should not suffer due to the legal impediment of the moratorium and should be granted relief.

Conclusion:
The Supreme Court allowed the appeal, quashing the High Court's judgment. It directed that the payment of Rs.1,24,28,500/- already deposited by the appellant be appropriated towards settlement dues under the "Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019" and that a discharge certificate be issued to the appellant. The Court emphasized that the appellant was otherwise entitled to the benefit under the Scheme, and it was impossible for the appellant to make the payment during the moratorium due to legal restrictions.